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4/26/2012 @ 9:04AM6,564 views

Accretive Health, Inc. Bruised After Attorney General's Report

Minnesota Attorney General Lori Swanson Tuesday published a six-volume report on the practices of non-profit hospital and clinic operator Fairview Health Services and one of its service providers, Accretive Health, Inc. (NYSE:AH). The report focused on a broad range of issues, but the debt collection and payment practices caught the most attention. Accretive’s stock fell more than 40 percent Wednesday.

Accretive provides revenue cycle management services for healthcare providers. In short, the company helps hospitals get money through billing and collection services. Fairview was a prominent client.

Tuesday, Swanson’s office posted the report accusing Accretive of inserting debt collectors into Fairview’s admission process, and in some cases, forcing patients to pay before treatment was given. Helped by an interestingly-timed New York Times article, the story is now all over every news outlet. On Wednesday, it was NYTimes.com’s most emailed article.

And there’s that word again: “report.” Swanson did not announce a lawsuit or other legal action against Accretive (or Fairview, for that matter) Tuesday. Her office merely made public a report with a lot of detailed accusations, and a high-profile newspaper article was published shortly thereafter.

So how much impact did that information have? Accretive’s stock finished at $10.75 Wednesday, a 42 percent drop from the opening price. Volume was more than 20 times the daily average (with everyone selling, obviously).

When Accretive announced it had lost Fairview as a client, it took a 19 percent hit. And, truth be told, it has struggled to recover that loss. But this is a company that earned $29.1 million in 2011 on $826 million in reported revenue with adjusted EBITDA of $81.5 million. It would not seem that a company with those numbers would be given to such wild swings on mere news, non-material news at that.

There is a good chance a lot of the share price will come back Thursday, as people like to buy low, I’m told. But Wednesday’s move should be viewed as a cautionary tale about what can happen when information on a company is released through respected outlets.

Patrick Lunsford is senior editor at insideARM.com, the most credible source of news and opinion for the professional accounts receivable management (ARM) industry.

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I would predict some bounce-back, but not much. Credibility is currency in healthcare, and Accretive Health just lost a lot of it. The Minnesota State Attorney General may have only filed a single suit, but it involves violations of numerous laws, all of which tug at the heart strings. The allegations, based on the level of detail and the volume of complaints are also extremely credible. My bet is that Accretive Health has to change its name again and reconstitute itself in order to survive, like it did a couple years ago.

Accretive Health in Michigan has the same practice of exactly what happened in MN, is the Michigan Attorney General going to step up and look into this company instead of giving them tax credit after tax credit for having a site in Kalamazoo, MI? Or is MI to spineless to step up and protect their citizens?

I just finished a training program with CCT4 at Accretive Health and felt that the company culture was very strange using fear and intimidation tactics with their employees who seemed quite miserable generally. I was told “not to think” by the trainer while learning a “transfer DRG” site and when I asked why I was stared down coldly. I continually felt that they did not want to hire independant thinkers but robots who would do whatever they said without questioning. Many of these trainees were desperately looking for employment and were forced to “not think” in order to get hired.

“And there’s that word again: “report.” Swanson did not announce a lawsuit or other legal action against Accretive (or Fairview, for that matter) Tuesday.”

The AG filed suit against Accretive back in January. Kinda kills your argument.

Of course, that would have taken 3 minutes of research (going to AG’s website) but it appears you came to your conclusion that this was “non material news” after two minutes of work. Try reading the whole report if you find a few more minutes. There are several indications these issues are systemic rather than just practices at a single hospital.

Todd Fernandez: “Try reading the whole report if you find a few more minutes.”

I would give you the same advice. Two paragraphs before the one you reference, I note that Swanson sued Accretive in January. It’s right there in the story.

This was an article about the stock price of Accretive, not the allegations lodged against it. For that purpose, the report that Swanson issued was, in fact, non-material. Accretive losing Fairview as a client was material, which caused an earlier share price drop, which I also noted in the story.

Well, so much for the Thursday stock bounce-back. More importantly, Patrick, I think you missed a larger point with your comment:

“But Wednesday’s move should be viewed as a cautionary tale about what can happen when information on a company is released through respected outlets.”

No – it’s more a cautionary tale about aggressively pursuing a controversial business model, believing your company can fly “under the radar” at a time when the provisions and costs of health care are sensitive and politicized. In a sense, the gig was up when the Minnesota AG decided to publish the report. So much for risk management.

We don’t really yet know the extent to which Accretive’s misconduct in Minnesota was an anomaly or standard practice. But one thing is for sure – NYT’s attention to Swanson’s report seems to have created a tipping point – where every contract with every customer is going to be investigated and scrutinized, and the Chairman’s prior misrepresentations of involvement with debt collection companies will be raked over the coals. Really, Accretive brought this misery on themselves through their sloppy behavior. We’ll just have to wait to see the ultimate impact on their stock price.

So called “respected outlet”, do your own research on Minnesota attorney general Lori Swanson, and her approaches that,s all in the public records. Lori Swanson allegation does not reference any specific situation in which alleged delay in care resulted in bad medical outcome or turn away any person from medical care, and yet she have caused media brink causing enormous damaged to Accretive Health. As an American, I am disappointed and shamed of some Americans who believe they are entitle to free medical care, and indirectly Lori Swanson supporting that cause in the name of proctecting consumer with her power, and yet so many hospitals are brink of closing in this country. Do your own research on Lori Swanson, and make your own judgement about Accretive Health.